There isn't much to be said for Nicholas ­Ridley, the most desiccated ­market ­fundamentalist in Margaret ­Thatcher's cabinet, but at least he was aware of the ­government's ­contradictions. When he took over the Department of Trade and Industry in 1989, he asked: "What is the DTI for? I've got bugger all to do and thousands of staff to help me do it." Thatcher's government had spent 10 years preaching that people should stand on their own two feet and that the market should be free from meddling by the state. But it ran a large department whose purpose was to nanny free enterprise.

The name has changed, to Business, Enterprise & Regulatory Reform, but the department's policies have not. I think, however, that I have an answer to Ridley's question. BERR, now run by Lord Mandelson, functions as a fifth column within government, working for corporations to undermine democracy and the public interest. Since he became business secretary in October, Mandelson has been quietly building a bonfire of the measures that protect us from predatory corporate behaviour.

You don't have to look very far to see where BERR's interests lie. Most government departments contain either one unelected minister or none. Two departments (the Foreign Office and Innovation, Universities and Skills) each accommodate two unelected ­ministers. But BERR has four. It is the only ­department of government in which unelected ministers outnumber members of parliament.

Until he became minister for communications in BERR, Lord Carter was the chief executive of Brunswick Group, a big public relations firm whose clients include British Airways, Barclays, Unilever, Rolls Royce and BT. Lord Davies, the minister for trade and investment, was chairman of Standard Chartered and a non-executive director of Tesco. Until October, the trade minister was Digby Jones, formerly the director general of the Confederation of British Industry. Lord Jones refused to join the Labour party, or to say which party he would support at the next election.

As for Lord Mandelson, who previously ranked second on Gordon Brown's execution list, the only convincing explanation for his appointment is that business demanded it. Mandelson, who once avowed that "we are intensely relaxed about people getting filthy rich" was partly responsible, both in Blair's government and as European trade commissioner, for promoting the culture of deregulation that catalysed the economic crisis. Yet even today he boasts about "a decade of reform that has given the UK the most open and flexible product and labour markets in the world".

These unelected ministers appear to have formed their own lobby group within government, to prevent those upstart parliamentarians from interfering with the democratic rights of business. They are responsible for some of the policies that now threaten to tear the Labour party apart.

Mandelson is the promoter of Labour's crazy scheme to part-privatise Royal Mail. Wildly unpopular with both the public and Labour MPs, it breaks a manifesto commitment and could provoke a parliamentary rebellion big enough to unseat the prime minister.

But most of his assaults on democracy have achieved much less attention. Last week he helped neuter the EU's working time directive by ensuring that European companies will still be able to push their employees into working for more than 48 hours a week. BERR issued a gleeful press release bragging that talks on the directive "have broken down without agreement being reached" as a result of government filibusters. Mandelson's attempt to prevent companies exploiting their female workers was less successful. The ­equality bill sought to audit large companies to ensure that they were not paying women less than men for the same jobs. Mandelson insisted the audits should be voluntary, and that the policy should first be approved by the CBI, which often seems to be the real government of Britain.

Last month, although it passed almost unnoticed, BERR deregulated the news distribution industry. This is a gift to the supermarkets but a disaster for both small newsagents – and for freedom of speech. The companies that distribute newspapers and magazines to the shops have historically guaranteed, in return for exclusive delivery rights, to supply whatever stock a shop requests, however small the order might be. This allowed small newsagents to survive and protected publishers from censorship by powerful retailers. (In the United States, supermarkets often ­dictate the contents of the magazines they sell). Tesco has been trying to break the ­distribution agreement since 2000; now Mandelson has delivered.

A few days ago, the Guardian revealed that BERR has set up a new unit, whose purpose appears to be to lobby another department on behalf of business. The business department relinquished its responsibility for energy policy only six months ago. Now it has created an energy and climate change unit, whose brief and title look suspiciously similar to Ed Miliband's Department for Energy and Climate Change. While Miliband gets the environment, Mandelson appears to be doing everything in his power to trash it. Over the past year he has secured £2.6bn in subsidies, loans and guarantees for the motor industry. He boasts that this is "effectively the same as underwriting the entire vehicle sector's research and development and capital expenditure for a year". He is widely blamed for the decision to build a third runway at Heathrow.

Last month BERR launched a consultation about the EU's attempts to strengthen its directives on waste electrical equipment and hazardous substances. The EU is trying to cut the amount of cyberjunk going into ­landfill and to prevent companies ­sending dead computers overseas to be ­dismantled by child labourers. In ­drafting the ­consultation document, Mandelson's department conferred with 10 ­industry bodies but no trade unions or ­environment or development groups.

In the strategic plan it released last month, BERR announced that it wants the government to "match … the influence it ­exercises in the economy to the strategic needs of business". It also wants to second even more people from the private ­sector into government, which is ­already ­infested with people whose public ­duties conflict with their ­commercial interests. It revealed that, as of last month, "grant applicants to all ­research councils will have to set out the ­economic impact of their proposed research". This appears to mark the end of the pursuit of knowledge for its own sake: all research, whether funded by the state or corporations, must now ­consider the needs of business.

Business is perfectly capable of ­making its own representations. It does not require a cell inside government to ensure that its voice is heard; it should compete, like the rest of us, for the attention of ministers. Mandelson's department has one legitimate function: simplifying and clarifying regulations. The others – the trade missions, the lobbying, the featherbedding – achieve the rare distinction of undermining both social democracy and free markets.

BERR now has a budget of £1.92bn, £460m bigger than it was last year. The government is looking for savings. It should close this department down.